Gold Price Outlook: 18, 22, 24 Carat Gold Prices Outlook Promising In Wedding Season? Tata Company Big Winner

Gold prices in India are higher by 30% compared average H2CY24, a report of brokerage Nuvama said. And if combined with double-digit 18% volume growth in gold, the outlook ahead looks promising especially with big festive events like Diwali, Navratri and Wedding Season queued ahead. The brokerage also shed light on the expansion move of Titan who is the largest gems and jewellery company in India.

According to Nuvama, the affluent segment led jewellery purchases in Q1, but Q2 is seeing a democratisation of the market with lower-priced items gaining popularity. Semi-urban and rural markets are also picking up.

World Gold Council (WGC) reckons demand in CY24 shall be 850 tonnes, implying 12% YoY growth, which, in turn, means H2CY24 could have industry-wide volume demand growth of 18%. Channel checks suggest robust primary demand fuelled by aggressive store expansion ahead of the festive season, Nuvama cited.

Further, another key possible leading indicator of the sector's performance is the import of gold (in value terms). As per WGC data, total gold imports in July combined are likely to be 11% higher YoY, aided by a pickup seen in August.

Taking into consideration gold price performance, Nuvama said, that current gold prices are 30% higher than average H2CY24 levels, which combined with 18% volume growth paints a very promising picture for the second half.

It pointed out that domestic gold prices which were otherwise trading on a discount level for the past five months before customs duty cut. The PM Modi-led government more than halved the basic duty on gold from 15% to 6%.

In Nuvama's view, domestic prices were trading at a discount due to a combination of excess inventory obtained through preferential trade agreements
and weak demand. Adding it said, "The announced cut in basic customs duty boosted domestic prices, which were otherwise trading at a discount for five
consecutive months."

Also, consistent central bank buying has been fuelling both volume and price growth, it said.

Going ahead, Nuvama said, "We anticipate a return to normal levels starting in the second quarter. Jul-Aug'24 has begun well, and we forecast further volume growth as we approach the peak wedding season." While the brokerage anticipates promising growth in gold prices for the second half of FY25 as well.

Hence, the 18K, 22K, and 24K gold prices outlook are still healthy ahead.

However, Nuvama believes that there is a clear correlation between jewellery consumption (in value terms) and Titan's standalone revenue. Quarterly consumption trends serve as an indicator of how organised players are likely to perform.

Nuvama tried dissecting Titan's non-studded growth by various vectors of growth for the company. Here's what the brokerage observed:

1. Three-year window between Q3FY15 and Q2FY20: Gold prices during the period grew at mid-single digit CAGR. Meanwhile, Titan's volume per store CAGR kept expanding (positive correlation between price and volume). This period was also supported by high single-digit store expansion. Combined, the three vectors helped Titan to grow the non-studded revenue at over 20% CAGR.

2. Two or three-year window during Q4FY17-Q2FY20: Higher per-store volume base during demonetisation was difficult to surmount in subsequent years. The absolute per-store volume decline was supported by rising prices. Almost the entirety of the revenue growth can be attributed to store network expansion.

3. One-year window during Q3FY18-Q4FY24: Low to mid-teens CAGR price growth led to a decline in volume growth albeit at a slower pace. Store expansion picked up at 11-15% leading to 17-26% YoY revenue growth. An interesting bit is revenue per store remained positive.

4 Q1FY25: In a notable exception, volume declined 9% YoY. Nuvama said, "We anticipate a return to normal levels starting in the second quarter.